Pratip Chaudhuri, former chairman of State Bank of India, was arrested by the Jaisalmer Police in a case involving the sale of a non-performing account by India's largest lender to an asset reconstruction company.
Chaudhuri was arrested from his residence in Delhi, the Jaisalmer Police said in a statement on its website. The arrest, however, is not related to his role at SBI.
The action comes over alleged discrepancies in the sale of Garh Rajwada, a hotel project in Jaisalmer, Rajasthan, by SBI to Alchemist Asset Reconstruction Co. Chaudhuri is a director on the board of the stressed asset buyer.
In a public clarification, SBI said it had assigned the recovery of loans associated with the hotel project to Alchemist ARC in March 2014. Chaudhuri retired from SBI in September 2013. India's largest lender said all due process was followed during the sale of the loan account, which had turned non-performing in June 2010.
After buying the project, Alchemist ARC referred the case to the insolvency court. In December 2017, a non-banking finance company bought the hotel project under the Insolvency and Bankruptcy Code, the SBI statement said.
The bank said "the borrower had initially filed an FIR with the state police against the sale of asset to ARC. Aggrieved against the negative closure report filed by police authorities, the borrower had filed a protest petition" before chief judicial magistrate's court.
According to the bank, the court appears to not have been correctly briefed on the sequence of events involved in the sale.
SBI is not a party to the case filed by the borrower against Alchemist ARC.
The phone number of Alok Dhir, promoter of Alchemist ARC, was not reachable.
Chaudhuri was the face of SBI's recovery efforts against Kingfisher Airlines in 2012-13, when banks had recognised the account as a non-performing asset.
His arrest sparked outrage. Rajnish Kumar, former chairman of SBI, called it a "ridiculous action".
One of the most ridiculous action by Rajasthan Police . A shameful act . All bankers need to unite and condemn such high handedness of Police Deptt
Sunil Srivastava, former deputy managing director at SBI who worked under Chaudhuri, called for an overhaul of the judicial processes involved in arresting former bankers.
Absolutely pathetic , is the system being gamed again by defaulters despite all efforts by Modi govt, time for overhaul of judicial processes to improve transparency and introduce accountability @pmoindia
Proceedings against former and current bankers in alleged corruption cases have had a severe chilling effect on decision making in the past. In July 2018, the government amended the Prevention of Corruption Act, to require the police and other investigative agencies to acquire prior permission from a competent authority before arresting former and current public sector employees, including bankers.
The move came after the Indian Banks' Association raised concerns about the treatment of bankers after genuine business decisions failed. The IBA sought changes in law after RP Marathe, former managing director and chief executive officer of Bank of Maharashtra, was arrested by the Pune Police. Prior to that, officials at IDBI Bank Ltd. had also been arrested in the Kingfisher Airlines case.
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